Oct. 2013 to Jan. 2014 China Bulletin

Furthering opening of the Shanghai Free Trade Zone (SFTZ), the Ministry of Industry and Information Technology (MIIT) and Shanghai Municipal People’s Government issued the Opinions on Further Opening Value-Added Telecommunications Business to Foreign Investment in the China (Shanghai) Free Trade Pilot Zone, with effect from January, 2014.  The opinions open several value-added telecoms services (VATS) to foreign investment in the SFTZ, including call centers, domestic multiparty telecom services, internet access services, domestic Internet virtual private network services, online data processing,  and transaction processing services (business e-commerce).  Some of these areas are opened for the first time – the 50% VATS cap has been increased or removed for others.

By way of background, China agreed to open VATS in China to foreign investment in 2001 as part of its accession to the World Trade Organization.  The opening included voice mail, on-line information and data base services, electronic data interchanges, value-added fax services, code and protocol conversion, and on-line information and data processing.  Draft regulations in June proposed add new categories to the repertoire of VATS.  The Provisions for Administration of Foreign-Invested Telecom Enterprises, issued by the State Council in 2008, set out the 50% foreign investment limit and built on capital and other qualifications imposed in earlier regulations on foreign investment in VATS.  The State Council opinion suspends these provisions in the SFTZ to the extent they conflict with SFTZ policies.

Specific VATS that businesses located in the SFTZ can provide nation-wide are:

Information services (app stores only):

  • Foreign investment can exceed 50%

Storage and forwarding services (voice mails, emails, etc.):

  • Foreign investment can exceed 50%

Call Centers:

  • Foreign investment can exceed 50%

Domestic Multiparty Telecom Services:

  • Foreign investment can exceed 50%

Internet access services, including home Internet access:

  • Foreign investment can exceed 50%, but the access services can only be offered within the SFTZ

Domestic Internet Virtual Private Network Services:

  • Foreign investment is limited to 50%

Online data processing:

  • Foreign investment cap is increased to 55%

Transaction processing services (business e-commerce):

  • Foreign investment cap is increased to 50%

The Opinions also call for adoption of safeguard measures and improved collection and analysis of information, and identify network infrastructure, data resource and data protection requirements.

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